Question

9) Although appealing to more refined tastes, art as a collectible has not always performed so profitably. During 1995, Christie’s auctioned the William de Kooning painting Untitled. The highest bid of $2.2 million was rejected by the owner, who had purchased the painting at the height of the art market in 1989 for $3.52 million. Had the seller accepted the bid, what would his annual rate of return have been

Answer 1

Answer:

-7.05% per annum

Explanation

Years of investment in painting 1989 to 1995= 6yrs

Expected loss in investment 3.2m- 2.2 m= 1.32

Net loss per annum 1.32/6= 0.22

Annual net loss return=0.22/3.12*100

=7.05%